Predicting Stock Market Returns with Aggregate Discretionary Accruals
53 Pages Posted: 22 Jun 2006
There are 2 versions of this paper
Predicting Stock Market Returns with Aggregate Discretionary Accruals
Date Written: June 2006
Abstract
We document that the value-weighted aggregate discretionary accruals have significant power in predicting the one-year-ahead stock market returns between 1965 and 2004. The predictive relation is stable and robust to different ways to measure market returns and discretionary accruals as well as to the inclusion of other known return predictors. The value-weighted aggregate discretionary accruals are positively related to future stock market returns and negatively correlated with contemporaneous market returns. Our extensive analysis favors the managerial equity market timing story and suggests that managers of large firms have stronger market timing ability than managers of small firms.
Keywords: aggregate discretionary accruals, time-varying risk premium, predictive regressions, managerial market timing
JEL Classification: G1, M4
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Stock Returns, Aggregate Earnings Surprises, and Behavioral Finance
By Jonathan Lewellen, S.p. Kothari, ...
-
Accruals and Aggregate Stock Market Returns
By David A. Hirshleifer, Kewei Hou, ...
-
Predictability and the Earnings-Returns Relation
By Gil Sadka and Ronnie Sadka
-
Predictability and the Earnings-Returns Relation
By Gil Sadka and Ronnie Sadka
-
Predicting Stock Market Returns with Aggregate Discretionary Accruals
By Qiang Kang, Qiao Liu, ...